The Euro to US Dollar (EUR/USD) exchange rate cooled by around -0.25% on Monday morning.
With tensions in Europe mounting regarding Greece’s future as a member of the Eurozone, the shared currency declined versus the majority of its most traded currency rivals. Although the fallout from a Grexit has been priced-in to a certain extent, statements from Athens officials who refuse to budge on electoral red lines has seen the government’s relationship with the Eurogroup weaken. With a large repayment to the International Monetary Fund (IMF) due on Tuesday, the likelihood of a default is significant.
The US Dollar, meanwhile, strengthened versus many of its major peers in response to speculation that the Federal Reserve will move away from a data-centric monetary policy outlook. This may cause futures traders to bring forward bets as to the timing of a rate hike after a string of disappointing domestic data results pushed back said bets.
The Euro to US Dollar exchange rate is currently trending in the region of 1.1164.
With Greece and Eurogroup officials meeting today in order to try and hash out an agreement for Greece to unlock aid, the single currency softened versus most of its major rivals. The declination is in response to speculation that Athens will not agree a deal with creditors who propose reforms which would contradict the new government’s electorate red lines. Certainly, negotiations are unlikely to come to a conclusion today; a notion acknowledged by Greek Finance Minister Yanis Varoufakis who stated that the talks would be ‘difficult’. Also fuelling the Greek pressure cooker is the €750 million repayment to the IMF due on Tuesday. Without securing bailout funds from creditors the cash-strapped nation is almost certainly going to default on the payment.
The US Dollar gained versus many of its most traded rivals in response to the prospect of the Federal Reserve moving away from a data-centric monetary policy to one which follows the markets. The recent succession of less-than-ideal domestic data results caused the US Dollar to soften dramatically as futures traders delayed bests as to the timing of a benchmark rate hike. The move from explicit guidance to data-led policy may be short-lived, however, as the Fed try to strike the balance between preserving flexibility whilst safeguarding against any shocks.
Looking ahead for the EUR/USD pairing, there will be several influential economic publications and events provoking volatility. Of particular interest for those invested in the common currency will be the EU’s Economic & Financial Affairs Council Meeting in Brussels, German Gross Domestic Product and Eurozone GDP. For those trading with the US Dollar, Advance Retail Sales and the University of Michigan Confidence report will be most closely scrutinised.
The Euro to US Dollar exchange rate was trending within the parameters of 1.1131-1.1202 on Monday.